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Regulatory Sanctions

A Branch Manager and His Well Oiled Machine, Nailed by FINRA

March 1, 2019

by Howard Haykin


From 2006 through most of 2016 (the “Relevant Period”), a supervisory principal at Wells Fargo Advisors’ Lake Oswego branch office, who later became that office’s Branch Manager (“BOM”), regularly had his 2 licensed sales assistants sign his name (or affix his electronic signature) to firm documentation to evidence his fulfillment of supervisory functions – whether or not he actually performed the required tasks.  - - as charged by FINRA, which so far has reported sanctions against only the BOM and one of his sales assistants.
  • In AWC #2016051302401, the BOM … agreed to a $10K fine and 2 consecutive suspensions - 2 months in all capacities, and 4 months in any principal capacity.
  • In AWC #2016051302301, the Sales Assistant … agreed to a $5K fine and a 2-month suspension.



THE RELATIONSHIP.    The BOM maintained a long-standing professional relationship with the 2 sales assistants – which began at Piper Jaffray prior to their joining Wells Fargo Advisors. While we don’t have the specific work experience for a second sales assistant, we do know from FINRA and BrokerCheck that both the BOM and the (named) sales assistant joined Wells Fargo in July 2006 – where they remained until August 2016, when they both voluntarily resigned.


Wells Fargo terminated the employment of the BOM and his sales assistant, while alleging that … both voluntarily resigned during the Firm's review into whether the BOM “shared his login information and password with two other team members, which resulted in those team members performing account-related tasks on his behalf, as well as whether the BOM allowed another team member to sign documents on his behalf.”


BOM and sales assistant responded identically to the allegations: “I was never notified that I was under any internal review when I made my decision to voluntarily resign and deny the internal review assertions are related to my resignation. Further, I do not believe that I violated Firm policies.”



WHAT WENT WRONG, ACCORDING TO FINRA.    During the 10-year period that the BOM and his 2 sales assistants (the "BOM Team") were registered with Wells Fargo, they each used the same password to access the Firm's systems. In this manner, each BOM Team member could readily access other team member's email, Worklist and applications.


During the Relevant Period, the BOM authorized his 2 sales assistants to access his “Worklist” of tasks he was required to complete – which included the review and approval of new accounts. They did so by using their common password to access his Worklist in the Firm's systems. The BOM further authorized the 2 sales assistants to approve the new accounts that appeared on the BOM’s Worklist. Upon completing the authorized reviews, the sales assistants inserted the BOM’s electronic signature, representing that the BOM had reviewed and approved the newly-established accounts - which was not true.


During a 6-1/2 year timeframe during the Relevant Period, the BOM further authorized the (named) sales assistant to complete other supervisory functions – namely, reviewing incoming and outgoing correspondence, along with inventories of branch checks. The BOM also authorized the sales assistant to sign his name - whether by use of a signature stamp or by actually signing his name - to Firm documents requiring his supervisory approval.


By virtue of the foregoing, the BOM caused the falsification of Firm documents (and the sales assistant falsified Firm documents) in violation of NASD Rule 2110 (from 2006 through 2008) and FINRA Rule 2010 (from 2009 through August 2016.



FINANCIALISH TAKE AWAYS.    Accepting FINRA’s charges at face value, I concur that both individuals committed violations and deserved to be sanctioned. Yet, I believe the sanctions should have been more disproportionate. By that I mean the BOM's penalties should have been more severe. It was the BOM, after all, who abdicated his as supervisory principal and branch manager obligations or responsibilities by improperly passing them off to his sales assistants. The Sales Assistant, for her part, essentially ‘aided and abetted’ the BOM's violative conduct.


Two additional notes: 

     First, ... it would have been helpful for FINRA to have mentioned whether the BOM ever reviewed the 'delegated tasks' conducted by his sales assistants. Such reviews would indicate that the BOM was not blind to the results of the delegated tasks. Yet, based on the relatively insignificant nature of the sanctions, I'm of the belief that FINRA did not view the violations as very serious and the regulator concluded that little, if any, harm resulted from the violative conduct.


     Second, I disagree with FINRA's contention that supervisory reviews should not be delegated to individuals unless they hold the securities licenses required to carry out supervisory functions. I believe that supervisory tasks can be delegated, so long as: (i) the delegatee is competent and adequately trained for the particular task(s); (ii) the member firm is aware of such an assignment and has documented its approval; and, (iii) the delegating supervisor carefully monitors the delegatee’s work and evidences such reviews on the firm's books and records.



The BOM's case was reported in FINRA's Disciplinary Actions for January 2019.

The licensed Sales Assistant's case was reported in FINRA's Disciplinary Actions for February 2019